Last week’s Illinois Supreme Court ruling on retiree health insurance is a credit negative for the state, Moody’s Investors Service said Friday.

The reason, Moody’s said, is the decision could foreshadow how the court will rule on the broader pension reform law the state hopes will save billions of dollars in pension costs over the coming years.

“The majority of justices expressed views that run counter to the rationale used in recent pension reform legislation for certain city and state plans,” Moody’s said. “We therefore perceive increased risk that the Illinois Supreme Court will rule the pension reform legislation unconstitutional which would jeopardize $32.7 billion of pension liability reduction.”

The court ruled last week that state-subsidized health insurance for retirees is a protected pension benefit and that the state cannot impose premiums on retirees who were promised premium-free insurance. Moody’s said the ruling shows the court has “an expansive view” of the state constitution’s pension protection clause, which says pension benefits cannot be diminished or impaired.

The pension reforms approved last year curtail annual raises in pension benefits, increase the retirement age and otherwise change benefits for current and retired workers. Attorneys for the state have argued Illinois’ precarious finances give the governor and legislature latitude to change those benefits despite the constitution.

“The court could still be persuaded by arguments outside the scope of the current ruling, such as the idea that extreme pension funding pressure prevents the state or a local government from providing for public health and safety, a responsibility higher than adhering to pension promises,” Moody’s said. “The ultimate outcome on the state’s pension reforms will remain uncertain until the court rules on their legality directly.”

Several lawsuits challenging the constitutionality of the pension reform law are currently pending in Sangamon County Circuit Court. The next status hearing on those cases is scheduled for July 22.